gas demand +.9%

Give Saudi/Russians comfort that they can keep hiking.

And markets say Fed will keep ‘accommodating’.

So much for higher prices curbing demand!

DJ US Gasoline Demand +0.9% On Week – MasterCard SpendingPulse(DJ)

NEW YORK (Dow Jones)–U.S. gasoline demand for the week ended Dec. 21, measured by purchases at the pump, rose 0.9% from a week earlier, according to a report by MasterCard Advisors LLC, a division of MasterCard Inc. (MA). Gasoline demand increased by 597,000 barrels, or 85,286 barrels a day, to 67.919 million barrels, or 9.703 million barrels a day, last week, according to the report, which is compiled by SpendingPulse, a retail data service of MasterCard Advisors. The four-week average demand level was 65.518 million barrels, or 9.36 million barrels a day, MasterCard said, up from 96,429 barrels a day from a week ago. Retail gasoline prices fell 1 cent to an average $2.98 a gallon over the week, the report said. That is 28.4% higher than a year ago.

SpendingPulse is a macroeconomic indicator that reports on national retail sales and is based on aggregate sales activity in the MasterCard payments network, coupled with estimates for all other payment forms, including cash and check. MasterCard SpendingPulse doesn’t represent MasterCard financial performance. The Department of Energy is due to issue its weekly petroleum data, including gasoline demand, on Thursday at 10:30 a.m. EST.

The data, put out by the DOE’s Energy Information Administration statistics and analysis unit, doesn’t count how many gallons are sold. Instead, it offers a “Product Supplied,” or implied demand figure, in its weekly report. “Product Supplied” represents the total volume of gasoline that has moved on from refineries, pipelines, blending plants and terminals on its way to supplying retail stations.

-By Matt Chambers, Dow Jones Newswires; 201-938-2062;
matt.chambers@dowjones.com
Dow Jones Newswires
December 26, 2007 14:00 ET (19:00 GMT)
Copyright (c) 2007 Dow Jones & Company, Inc. – – 02 00 PM EST


Saudi/Fed teamwork

Looks like markets are still trading with the assumption that as the Saudis/Russians hike prices the Fed will accommodate with rate cut.

That’s a pretty good incentive for more Saudi/Russian oil price hikes, as if they needed any!

Likewise, the US is a large exporter of grains and foods.

Those prices are now linked to crude via biofuels.

And the new US energy bill just passed with about $36 billion in subsidies for biofuels to help us keep burning up our food for fuel and keeping their prices linked.

This means cpi will continue to trend higher, and drag core up with it as costs get passed through via a variety of channels. In the early 70’s core didn’t go through 3% until cpi went through 6%, for example.

Ultimately everything is made of food and energy, and margins don’t contract forever with softer demand. In fact, much of the private sector is straight cost plus pricing, and govt is insensitive to ‘demand’ and insensitive to the prices of what it buys. And the US govt. indexes compensation and most transfer payments to (headline) cpi.

And while the US may be able to pay it’s rising oil bill with help from its rising export prices for food, much of the rest of the world is on the wrong end of both and will see its real terms of trade continue to deteriorate. Not to mention the likelihood of increased outright starvation as ultra low income people lose their ability to buy enough calories to stay alive as they compete with the more affluent filling up their tanks.

At the Jan 30 meeting I expect the Fed to be looking at accelerating inflation due to rising food/crude, and an economy muddling through with a q4 gdp forecast of 2-3%. Markets will be functioning, banks getting recapitalized, and while there has been a touch of spillover from Wall st. to Main st. the risk of a sudden, catastrophic collapse has to appear greatly diminished.

They have probably learned that the fed funds cuts did little or nothing for ‘market functioning’ and that the TAF brought ff/libor under control by accepting an expanded collateral list from its member banks.

(In fact, the TAF is functionally equiv of expanding the collateral accepted at the discount window, cutting the rate, and removing the stigma as recommended back in August and several times since.)

And they have to know their all important inflation expectations are at the verge of elevating.

They will know demand is strong enough to be driving up cpi, and the discussion will be the appropriate level of demand and the fed funds rate most likely to sustain non inflationary growth.

Their ‘forward looking’ models probably will still use futures prices, and with the contangos in the grains and energy markets, the forecasts will be for moderating prices. But by Jan 30 they will have seen a full 6 months of such forecasts turn out to be incorrect, and 6 months of futures prices not being reliable indicators of future inflation.

Feb ff futures are currently pricing in another 25 cut, indicating market consensus is the Fed still doesn’t care about inflation. Might be the case!


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2007-12-26 US Economic Releases

2007-12-26 S&P-Case Shiller Home Price Index

S&P/Case-Shiller Home Price Index (Oct)

Survey n/a
Actual 192.9
Prior 195.6
Revised 195.7

2007-12-26 S&P-CS Composite-20 YoY

S&P/CS Composite-20 YoY (Oct)

Survey -5.7%
Actual -6.1%
Prior 4.9%
Revised n/a

2007-12-26 S&P-Case-Shiller 20 MoM%

S&P/CS 20 MoM (Oct)

Survey n/a
Actual -1.42%
Prior -0.84%
Revised n/a
% Change -69.05%

2007-12-26 Home Price Index

S&P/Case-Shiller TABLE

Survey 1
Actual -4
Prior 0
Revised n/a

It’s a big city index and has been down more than broader measures. Biggest drops have come in Miami, Las Vegas, Detroit, and Los Angeles. Also, these are October numbers – old news now.


2007-12-26 Richmond Fed Manufacturing Index

Richmond Fed Manufacturing Index (Dec)

Survey 1
Actual -4
Prior 0
Revised n/a

2007-12-26 Richmond Fed Manufacturing TABLE

Redmond Manufacturing TABLE

Some weakness and higher prices.


2007-12-26 ABC Consumer Confidence

ABC Consumer Confidence (Dec 23)

Survey n/a
Actual -23
Prior -17
Revised

This was when CNBC was still gloomy. Now that CNBC has turned a bit more optimistic, maybe the number will turn up as well.


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